Virgin Blue shares expected to plummet - 2 seperate analyses.

[Tunguska]

Compliments of the SMH:

Virgin's profit warning takes its toll on Patrick Corp
By Scott Rochfort
March 24, 2005

Patrick Corp's profit outlook looked increasingly shaky yesterday on worries the transport and stevedoring company will be burdened for years to come with its investment in Virgin Blue.

In the wake of Tuesday's profit warning by Virgin Blue, shares in Patrick fell 15c to $6 as the market grew increasingly worried the company could end up with far more than the original 50.1 per cent it originally set out to secure.

With Virgin Blue's interim chairman, David Ryan, expecting his airline's share price to dip below $1.90 a share when the offer expires, thanks to the downgrade Patrick is expected to be hit by a rush of acceptances before April 1.

In a sign Patrick is in no hurry to lift its stake in Virgin, the company yesterday did not even take advantage of Virgin's share price closing 1c lower than the $1.90 offer.

Patrick confirmed it now had a 51.6 per cent stake in Virgin.

Worries about Patrick were accompanied by a rush of Virgin Blue downgrades by analysts.

Citigroup Smith Barney slashed its price target for Virgin from $1.51 to $1.24 a share.

Citigroup's Jason Smith blamed the downgrade not only on high oil prices but also on competition from Jetstar, the slowing economy and Virgin Blue's "confusing strategy".

UBS slashed its full-year net profit forecast for fiscal 2006 by 43 per cent to $92 million, well below its forecast of a $134 million net profit in the 12 months to March 31, 2005.

The broker cut its price target on the airline to $1.50 a share.

Macquarie Equities downgraded its fiscal 2006 net profit forecast to $129 million while maintaining its fiscal 2005 forecast at $137 million.

Macquarie raised concerns about the ability of Virgin to raise airfares or add a fuel surcharge, given the move could further damage its already poor load factors (the proportion of seats filled).

Concerns about Virgin's domestic operations were compounded yesterday by figures which showed the airline's Pacific Blue subsidiary struggled to fill seats in the normally busy month of December.

Department of Transport figures revealed Pacific filled only 53.2 per cent of its seats on inbound flights from New Zealand. This compares to 78.4 per cent for Qantas, 72.7 per cent for Air NZ and 62.8 per cent for Air NZ offshoot Freedom Air.

Virgin heralded Pacific Blue as one of its key growth engines in the lead-up to its December 2003 listing.

There is now speculation Patrick managing director Chris Corrigan might want to scale down or even scuttle the loss-making airline.

Goldman Sachs JBWere recently speculated that Pacific Blue - which makes up 8 per cent of Virgin's total capacity - is losing $5 million to $10 million a year.

But amid signs Virgin's share price will tumble once Patrick's $1.90 a share offer expires on April 1, Sir Richard Branson's Virgin Group said it considered its 25.6 per cent stake in Virgin Blue a long-term investment.

Virgin Group spokeswoman Danielle Keighery said: "We are in the business of airlines globally and understand there are short-term challenges."

[Beer Can Dreaming]

When Citigroup Smith Barney, UBS and Macquarie give it the thumbs down then bet your bottom dollar these institutional investors will pull the plug at the last minute and possibly buy back when the share price has stabilised at the bottom.

I'd follow their lead and sell also.
The share price should come back but why wait?
Mum and Dad investors must be royally pissed !!!!
The Branson/Godfrey forecasts of share price performance have been lousy to say the least, if not misleading.
Didnt Branson have the shares in VB rated at $2.40-$2.90 or thereabouts by some undisclosed analyst only recently after Chris Corrigan made his generous offer????

The $1.24-$1.50 after 1 April as predicted by three leading analysts says it all.

Sounds like a good thing if they were to let Pacific Blue die a cruel death, its only dragging them down with no descernible profit/growth forecast.
Wonder how Godfrey and Branson would react to that one???

[Barbossa]

..at the risk of sounding like a VB basher, and 'm not, shareholders shouldn't take too much comfort from Branson staying for the long term...and here's why..

"Is Chris Corrigan buying into trouble?


By Stephen Mayne, Crikey's business commentator

The clouds on the horizon for Chris Corrigan's Patrick Corporation and Virgin Blue got a little darker this morning when the US Federal Reserve lifted official interest rates from 2.5% to 2.75%.

With oil prices surging and a global economic slowdown emerging, analysts are starting to think that Patrick Corp might be buying into trouble now that it has emerged with control of Virgin Blue and could potentially finish up borrowing $1 billion to win the "prize" as global interest rates rise.

The AFR's Chanticleer columnist John Durie had the best analysis, pointing out that Geoff Dixon's Jetstar strategy had been devastatingly effective. The hyperbole was really flowing when he declared it to be "one of the most successul management strategies in recent corporate Australian history."

It's certainly ironic that the ultimate union-buster Chris Corrigan has been ambushed by another powerful exercise in union busting, albeit one more subtly executed without dogs and balaclavas.

Richard Branson and his Virgin Blue CEO Brett Godfrey have some big decisions to make by Friday next week when the 1.90-a-share Patrick offer expires. Godfrey appears headed for the door as penance for failing to lock in hedging protection on the oil price and cranking up capacity by 50% last year.

Virgin Blue chairman Corrigan presumably took a "you blokes know best" position at the time, but has now decided to act in what could yet turn out to be a significant mistake, especially if Minardi owner Paul Stoddard gets his new airline up and running, cherry-picking the Melbourne-Sydney-Brisbane routes.

Patrick shares fell another 12c to a four-month low of $6.03 this morning, and Virgin Blue remains stuck on the unconditional bid price of $1.90, but with trades at $1.89 this morning. The stock was wallowing at $1.70 before Patrick's bid, and minorities could face a price of just $1.50 after the bid lapses on April Fool's Day, given the continuing profit warnings and turmoil hitting the airline.

This is the dilemma facing Branson and Godfrey, who together own 33% of the company and could walk away with another $560 million from Patrick. Godfrey has been mute throughout the takeover battle, yet there's nothing stopping him from accepting the offer from his chairman and pocketing $63 million for his 33 million shares. Sure, he never took it to the next stage, and
his 10.3 million options at $2.25 would just lapse, but who needs the grief?

Branson could also pocket an additional $500 million for his remaining 25% and still brag to be the most successful foreign investor in Australian history ? having turned an initial $15 million investment into a clear profit of $1 billion over six years.

If Branson refuses to sell, Corrigan could always turn around and do what Kerry Packer did to Alan Bond in the 1980s. Packer was negotiating to buy Channel Nine in Perth and Brisbane and Bondy was asking too much so he said words to the effect, "If they're worth that much, you should buy Melbourne and Sydney off me for $1 billion."

Bondy accepted the hospital pass, and the rest is history. Patrick Corp would still get out for a tidy profit if it exited at $1.90, but it looks like Chris Corrigan has decided to wade further into the maelstrom. Who knows, maybe Branson will get to buy it back for a fraction of today's $1.9billion valuation some time in the future"

..Branson's already made his money out of VB - leaving his shares where they are is just an each way bet - nothing ventured, nothing gained. Play money for him. There's plenty of evidence out there of Branson driving the establishment nutty for years..those who were alive at the time will recall his exruciatingly painful elbow-in-the-back to a "when the lights came on guess who was holding the gun" British Airways...apparently Lord King is currently retired in a nuthouse in the UK constant repeating the grinning beard's name....

[Ultralights]

as a rule, running my superannuations funds, and my partner being a director of club Plus super, Never listen to "analysts" reports! they are only propaganda to help in their own profiteering, Stock manipulation is Illegal, but if its an analyst report, thats ok.

analysts report bad news on a companies profit! the share price falls, people sell, brokers make money! then comes the news! "profits ABOVE preditions" yay! price goes up! people buying in larger numbers, brokers make money. and not to mention other clients of theirs.

My partner and i belive in the Kerry principle, If kerry is buying, Dont sell!! same with Corrigan. he is no dodo, and he is buying VB shares at $1.90 no more.and wants ALL of them! do you really think he would pay a premium price for those shares? he thinks they are cheap at $1.90, then what does he think their true value is? so if Cerrigan is buying aggressivly at $1.90, would you sell??

the only thing you should belive when looking at a stock, is the ACTUAL profit and loss statements and balance sheets! not analysts hype!

might have read a similar thing in the paper last week! :)

If you want to learn how to invest in companies and stocks, read up on a guy named Mr Buffet!

the great irony is, investing using buffets guidlines and principals, you would NEVER invest in airlines stocks! (if you read up on him you will know why)

[F/O Bloggs]

SepArate, sepArate, NOT sepErate.

[TIMMEEEE]

Ultralights.

I am a huge Warren Buffet fan and actually I do have a few shares in Berkshire Hathway myself!
I just hope Mr Buffet is around for alot longer.
I copped alot of **** during the tech stock wonder years for only investing a small amount (risk capital) whilst others went crazy spending tens and hundreds of thousands without concern.
Guess where their money is now?

As for the "Kerry" principal, this has been quoted by virtually every tabloid on the financial pages and although correct, is realistically impraticable in most cases.
By the time Kerry has made his move its all over, besides KP doesnt want others taking away from himself.

As for Chris Corrigan yeah, he is no dummy by any means but the fact remains that institutional investors that invested also are forecasting a large downturn in share price after the expiry of Patrick's offer.
The institutional investors WILL SELL and only buy back when they see it as a suitable investment again - thats the rule of the jungle.
Plain and simple.

At the moment there are other much more attractive shares to invest in than VB.

Corrigan will do some slashing and rectify the flaws that Godfrey either did or should have done.
He will make them more competitive in the longer term, rationalise routes, implement a useful fuel hedging policy and as mentioned elsewhere probably terminate Pacific Blue (much to Branson and Godfrey's disappointment).
He will implement a real business class service with a dedicated lounge (as opposed to the Blue Room or whatever its called) and do away with the face painting, singing happy birthday or boarding by shoe size or whatever.

In essence expect to see VB become a more professional outfit (not knocking the drivers - just the theatrics).

[Ultralights]

i have been investing using warrens techniques for quite a while now, and i am doing very well for myself.

as you said above, i also never went near tech stocks, and started buying up banks as they were sold down to pay for tech stocks! who's laughing now! :D not only the good growth over the past 5 yrs but the constant stream of divident cheques!

dont forget institutional investors are under pressure to show a return in the short term. my partenr is a director of a super fund, and she has no formal training what so ever! i have been share trading and running my own fund as a hobby for yrs!

after the offer expires, the shares will probaly drop, and give corrigan another oportunity to pick the rest up even cheaper, but in the 5 yr or longer view, i feel they wont get much cheaper, especially after corrigans changes start to have a real effect on the company, its bottom line and its image. but then again , i never invest in airline stocks, and dont pay that much attention to them.

[Dambuster]

Just had dinner with friends that work for JP Morgan.

Apparently Mr Corrigan will be able to pick up the remaining stock quite cheaply after 1/04/05.
The lads there reackon the stock is realistically valued at around $1.50-1.60 after the offer expires.
Corrigan is looking long term here for a profit and in the meantime it will sit well with his freight empire.

Branson's estimate of the stock being valued at $2.50-$2.90 or whatever he was quoting was laughed at by one and all apparently.
If that were the case, then the share price would be much much higher.

[Nomorecrap]

TIMMEE,

so you have 'a few shares in BRK yourself' !

How many?

(Current Value in AUD of 5 BRK.A shares is $560,256.00)

Applying Buffets philosophy to the Australian SE is virtually impossible in my view. Not enough liquidity in the market, and very few Industrial Monopolies.

[matca]

Thanks, still p!ssing myself laughing:ok:

[TIMMEEEE]

BRK.B shares only pal.
Wasnt wealthy enough or ballsy enough at the time to invest in the BRK.A.

[Dexter]

i herd a rumer that joan rabie has retyred
is it true

[Crash & Burn]

Yes, I saw her getting 4 new tyres the other day so I do believe she has retyred! :8

[HGW]

Dexter,
Your post should have read as follows: "I have heard a rumour that John Raby has retired? Is it true?"
Your posts are annoyingly hard to read. What are you 8 years old. Buy a dictionary please.
On the retirement, haven't heard anything and don't know about his tyres either.

[sinala1]

Apparently the retirement is true

As far as the retyrement goes, that does sound like a somewhat painful procedure for a Human Being to have performed - like a kind of reverse lyposuction?

:E

[OZ Junglejet]

Rumour is JC will be his replacement.

[ur2]

All just moving the deck chairs on the Titanic.

[Chief Chook]

More like the good ship, Poseidon, methinks.

Stories doing the rounds suggest that Captain J.R. is now worth a few bob.

Good for him - he took a gamble leaving a secure job o/s, and has given many pilots jobs here in Australia.

[ur2]

Yep,
And is said to have done more for pilots pay and conditions than anyone else in recent memory. :{